Samsung backs away from planned split

Samsung Electronics said last year that it was considering splitting the company in two

The world's biggest smartphone maker Samsung on Friday backed away from a planned corporate restructuring, saying that it will be difficult at this point to adopt a holding company structure.

Following the embarrassing recall of the exploding Galaxy Note 7 smartphone and under pressure from activist shareholders to improve corporate governance, Samsung Electronics said last year that it was considering splitting the company in two.

Its vice-chairman Lee Jae-Yong, heir to the parent Samsung group, has since been arrested and indicted for bribery, along with four other senior executives, in connection with the graft scandal that saw former President Park Geun-Hye impeached.

Kwon Oh-hyun, the company’s chief executive, said at the annual shareholder meeting on Friday that Samsung continued to review “all the options from multiple perspective, including legal, tax and strategic aspects,” but the process has “revealed certain adverse implications in such a transition, at this point, we see challenges in implementing a holding company structure.”

He did not elaborate, but told shareholders: "At this moment, it seems difficult to carry it out."

His comments offered investors their first glimpse into how Samsung is viewing potential restructuring in its governance structure amid the company’s leadership vacuum. His comments have also reinforced some analysts’ predictions that Lee’s absence would put his top agenda items such as governance reform, major acquisitions, and plans to improve shareholder returns on hold until his legal case is resolved.

Shareholders on Friday complained about Samsung’s involvement in the corruption scandal, piling pressure on the group to improve its poor corporate governance. Kwon has pledged to take further steps to boost transparency in the company’s decision-making process by strengthening the role of its board of directors.

A promised new governance committee, made up of independent outside directors, will still be set up by the end of April, Kwon said.